Evolution in State Governance Structures: Unintended Consequences of State Tax and Expenditure Limitations

Abstract

How did state governments respond to constraints imposed by tax and expenditure limitations? We argue that the states’ experiences with TELs help us understand an evolutionary dimension to political institutions and institutional change. We test if TEL states created new local governments in response to constraints TELs placed on state budgeting. Other studies show that states shifted their revenue and expenditure mixes in response to TELs. We demonstrate that they also shifted their jurisdictional mix of governance. We find that TEL states were more likely to create new local governments after the “tax revolt” of the 1980s. However, this effect depends on where TELs were introduced. They had greater effects on generating new governments in states where ballot initiatives were easier to use.